DOJ May File Lawsuits against Health Insurance Acquisitions

July 20, 2016 - The health insurance acquisitions between Anthem and Cigna along with Aetna and Humana is likely to be blocked by the Department of Justice (DOJ). According to the American Hospital Association (AHA), the Department of Justice will be filing lawsuits in the next two weeks against these health insurance acquisitions and, thereby, putting an end to these mergers.

The problem at hand is that these two major health insurance acquisitions will be negatively impacting consumers and market competition by bringing the top five major health payers down to only three. The American Hospital Association supports the decision to block these two health insurance acquisitions.

“We are pleased that the DOJ has vigorously investigated and appears ready to block these deals. This is good news for patients and consumers who need access to affordable health insurance,” AHA President and CEO Rick Pollack said in a public statement.

An anonymous source told The New York Times that antitrust officials from the Department of Justice feel that these mergers would harm competition across the health insurance market and the final decision to file the lawsuits will take place by the end of next week at the latest.

If the mergers are withdrawn, 2016 would be a year that would break the record for the number of withdrawn corporate deals since more than $700 billion of these deals have already been left behind, reports The New York Times.

A report from the Georgians for a Healthy Future organization outlines how these health insurance acquisitions could have an anti-competitive stance that would impact consumers with regard to “affordability, choice, and access to care.”

“The biggest risks that could occur are that the companies combine and use their newfound market power to raise prices, cut corners on healthcare, and just focus on making greater profits,” David Balto, Attorney at the Law Offices of David Balto, told HealthPayerIntelligence.com. “In that case, millions of consumers would have to pay more and be worse off. These mergers could undo a lot of the progress resulting from the Affordable Care Act, which depends on robust competition in health insurance markets.”

“The mergers would reduce the number of national health insurers from five to three. Essentially, you would have UnitedHealthcare, Anthem, and Aetna dominating the market. It might not be a monopoly, but it would be very close, very anticompetitive, and very bad for consumers,” Balto concluded.

With such major changes already hitting the health insurance market in recent years due to the Affordable Care Act, any major consolidation of the top four health payers could pose too much stress on consumer interests and the vitality of the health insurance market.

Since the Affordable Care Act, millions of Americans have gained health coverage while payers have been transitioning to new reforms such as value-based care reimbursement in order to remain competitive in their market. By cutting down on competition through these health insurance mergers, the payers Anthem and Aetna could essentially hold greater power to narrow their networks of providers and raise premium prices among consumers.

Thomas O’Connor, Managing Director at Berkery Noyes, mentioned that the Affordable Care Act may have actually stimulated the rise of mergers and acquisitions within the healthcare space.

“Because of the Affordable Care Act and all the activity it spawned, the whole industry is going to change. This could impact everything from consumerization of healthcare and getting more information to payers to solving some of the problems with the Affordable Care Act like high-deductible plans,” O’Connor explained.

“There are going to be a lot of transactions,” O’Connor continued. “That transition – that chaos – is spawning a plethora of deals. These transactions tend to be smaller and often have a focus on software and data analytics. Putting Anthem-Cigna and Humana aside, which are huge deals, we’re observing many acquisitions throughout the space.”

The report outlines that the health insurance acquisitions would lead to a rise in market concentration and, thereby, limit competition. In the state of Georgia, the health insurance market is already highly concentrated with 75 percent of the market being controlled by the top four health payers.

Bloomberg reported that a more finalized decision on whether the Department of Justice will file lawsuits against these two mergers will come later in the week and that the companies may pursue a settlement. One analyst told Bloomberg that Aetna and Humana are more likely to pursue the lawsuit in court while Anthem and Cigna would be less likely to fight for the merger in the courtroom.

After this news was first reported, the costs of shares among all four health payers dropped. Cigna fell 2.1 percent while Anthem dropped 2.2 percent and Humana declined by 3.9 percent.

Currently, the federal government’s position is that stronger competition in the health insurance marketplace is key to ensure consumer interests are protected. State insurance regulators are also unsure of the Anthem and Cigna consolidation. With ongoing opposition taking place against these health insurance mergers throughout the nation, it is likely that these deals will either fall through or take much longer than anticipated to birth.

Dig Deeper:

DOJ Sees Continued Opposition to Health Insurance Mergers 

Major Health Insurance Mergers May Leave Consumers “Worse Off”